Quality Assurance In China: Best Prac5ces

Transcription

1 Quality Assurance In China: Best Prac5ces Prac%cal advice for importers who want to avoid the traps of China sourcing Wri9en by Renaud Anjoran Founder and General Manager, Sofeast Quality Assurance

2 This e- book will show you that a buyer s decisions impact quality from the very beginning of a sourcing project. The four blocks of a good quality assurance strategy: Mee5ngs in the factory; quality inspec5ons ; product tes5ng Payments aeer quality is confirmed and/or OEM contract Supplier choice: business fit, no subcontrac5ng Clear communica5on of product specs & bill of materials 2

3 Introduc5on: sejng realis5c objec5ves Outsourcing produc=on to China requires more planning and more work than buying from a wholesaler in your country. GeAng a price and a sample is only the beginning. Here are a few considera=ons to keep in mind: Regarding cos5ng: Importers oeen forget to budget supplier qualifica=on efforts and product quality inspec=ons. By doing this, they try to save pennies by puang dollars at risk. Regarding 5ming: Your supplier will promise you a shipment date. But there will oeen be delays- - because you take too long to approve their samples and/or because they are late in produc=on. Keep at least 2 weeks of safety in your planning. Remember, rushing produc=on will usually affect product quality. Regarding quality: It is your responsibility to communicate clear specifica=ons to the supplier, and then to verify whether they are met. Warning: most Chinese manufacturers do not understand that if you get substandard quality, you will not be able to sell your goods at all. They oeen have a tendency to seole for what is probably good enough. So you will also have to set their expecta=ons about your produc=on. 3

4 1 st block: finding suitable suppliers If you purchase customized (made- to- order) products, you need to look for the right source. Switching suppliers down the road can be difficult geang the development and the produc=on right can take more than 6 months for a new factory. So, what criteria should you consider? Do not look for the biggest factory, the lowest price, or an (oeen meaningless) ISO9001 cer=ficate. The key ques=on to answer is: is my business aorac=ve to this supplier, and is he capable of delivering as needed? The most important aspect is their size. Ideally you should represent 10% to 50% of their volume: Do not choose a huge manufacturer who won t be flexible and will never give you priority. Conversely, avoid small workshops (less than 80 workers) that are highly unreliable. You should have a good look at the factory (by sending your staff or an independent auditor): Is it large enough for your orders during the peak season? Do they regularly make products very similar to yours? Is their quality system reliable enough? Can they give you references of other customers that you can call? Beware of uncontrolled subcontrac%ng Subcontrac=ng to a cheap workshop is very common, and it is detrimental to quality in 95% of cases. To prevent it, there are two things you can do: Ask your supplier to cer=fy in wri%ng that produc=on will take place in the factory they presented; Conduct an inspec=on when produc=on in under way (see part 4). 4

5 2 nd block: defining your requirements before produc5on starts Some importers see a sample, approve it, and ask the supplier to launch produc=on. This might be appropriate for some very standardized items such as computer wires, but for most consumer products it is very dangerous. A sample is not enough You should approve a perfect sample, but you should also write every detail about the materials, the product specifica=ons, and the packaging. For every piece of informa=on that you don t provide, a purchaser or a technician from the factory will have to make a choice. Are you sure that person will understand the intended use of your products, and all the liole things that seem obvious to you? Will she resist the tempta=on to go for the easiest and cheapest solu=on? Do not forget safety standards You should also get informa=on about the safety regula=ons that are applicable to your product on your domes=c market. You may visit official websites, or ask a quality assurance firm. You can also ask your supplier about it, but this is more risky. Write it all down The best prac=ce is to list your requirements in very precise terms, leaving no room for interpreta=on, and then having it translated into Chinese. This way, your meaning will not be distorted by the English- speaking (non- technical) salesperson. Then you should get a manager to approve your list of specifica=ons and your perfect sample. A signature at the booom of a document can make for a powerful reminder, should you need it. Requirements are not always respected Chinese suppliers focus on geang new business, and it means their samples must be perfect. However, bulk produc=on rarely turns out as nice as the samples. If the importer has already wired a deposit and has promised the goods to his own customers, he cannot cancel the order easily. Be prepared to discover that produc=on is not up to your expecta=ons. With a new factory, you should try to find out about it earlier rather than later (see next part). 5

6 3 rd block: regular quality inspec5ons (trust but verify) Made- in- China products are seriously inadequate about 20% of the =me. And sending a defec=ve shipment back to China is nearly impossible. Fortunately, your own staff or a third- party inspec=on company can check produc=on quality when the goods are s=ll in the factory. Warning: Chinese factories usually don t like to see professional inspectors (because they might have to re- work acceptable products and/or pay for re- inspec=ons). So the salesperson oeen says trust me, I will check quality myself. Do not fall into that trap. Op5on 1: inspec5ons during produc5on Checking the first finished products is very helpful to no=ce issues early. This way, the factory can immediately implement correc=ve ac=ons and you can plan accordingly. Op5on 2: final random inspec5ons For orders in regular factories, an inspec=on aeer produc=on is finished (a few days before shipment) can keep some pressure on the factory and catch quality disasters. But if the products are not acceptable, it might be too late to re- work them. How to plan for inspec5ons: When you develop new products, ask for an extra sample (for the inspector s reference). Write quality inspec=on required, at any =me deemed necessary by the buyer on your P/Os. If you pay by leoer of credit, ask for a passed inspec=on cer=ficate from an inspec=on company that you nominate. Keep track of the final inspec=on date and the ex- factory date, not only the shipment date. Use your bill of materials and product specs (see part 3) as checkpoints for the inspector. Laboratory tests: a complement to inspec5ons Depending on the relevant safety standards, you might have to get some cer=ficates. You have a range of solu=ons. The cheapest and riskiest is to ask your supplier to provide cer=ficates. The safest but most expensive is to ask the inspector pick up samples at random, and to send them to a lab that you pay directly. 6

7 4 th block: tying payments to quality approvals Payment terms are very important because you are in a posi=on of power as long as you owe money to your supplier: They will try not to be behind schedule because you might ask for a discount. They are not in a posi=on to refuse quality inspec=ons. They will have pressure to re- work the goods if your inspector finds quality issues. Note: the opposite is true aeer you have wired a deposit: you are hooked especially if your supplier can sell your produc=on to other buyers. Let s consider the main tools at your disposal: The leyer of credit (L/C) The safest payment method is a leoer of credit because you do not have to wire a deposit. It is usually suitable for large orders and for untested suppliers. The list of specifica=ons (see part 3) and the passed inspec=on cer=ficate (see part 4) should be among the documents required by your bank. The bank wire (T/T) If you need to keep bank fees to a minimum, you can pay by bank transfer. It is very common, but there are a few mistakes to avoid: Do not wire the 30% deposit before you get a perfect sample. Do not pay the remaining 70% before shipment. If they insist on a payment before shipment, nego=ate a payment aeer you have verified quality on a produc=on that is completed in totality. There are slight varia=ons of these numbers depending on the situa=on (maybe you need to wire something before a mold is opened). But the general principle is: keep at least 30% of the order value on your account un%l produc%on is finished and verified. You should discuss these terms very early, at the same =me as the pricing. If one supplier refuses, others will accept. 7

8 Two frequently asked ques5ons Should we buy directly from a manufacturer? Most intermediaries pretend to be manufacturers. It is possible to know if this is true (many companies offer inexpensive background accoun=ng checks). But factories themselves rou=nely subcontract some orders, so this issue is seldom clear. Some importers feel more secure purchasing from professional brokers. My advice is: be careful. At least 80% of local trading companies have the following bad habits: They work with cheaper (and less reliable) factories to maximize their margin. When there are quality issues, the buyer is kept in the dark. The trader s interest is NOT to risk a cancelled order or to nego=ate a discount. They don t own the factory, so they don t control it. Manufacturers usually give priority to their direct overseas customers, at the expense of the trading company and its customers. Should we use a contract? China is said to have no law, but this is wrong. Enforcement of contracts is not a problem, as long as they are properly wrioen by professionals. Do not use your regular lawyer for it, unless they have significant experience in China trade. OEM agreements are a helpful tool, par=cularly for large orders and/or for situa=ons that look par=cularly risky (e.g. you could not nego=ate good payment terms). The factory you approved, your product specifica=ons and bill of materials, your payment terms, and your quality control plan will all be part of the OEM agreement. That s why I touched on these points earlier. They are the cornerstones of successful China sourcing strategies. Note: OEM contracts also address other considera=ons (e.g. protec=on of your firm s intellectual property). Consult a specialized lawyer for more informa=on. 8

9 About the author Renaud Anjoran Founder and general manager, Sofeast (quality assurance agency in China) Tel: See LinkedIn profile Ø Resources (ar=cles, infographics, templates ) to go further: Ø Our company s services: Factory quality/social audits Product quality inspec=ons Manufacturing process improvements Ø To read more about our company: 9